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Custom Information Services (CIS)

Manufacturing Company Facts on ERP Benefits


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    I have written a lot about ERP (enterprise resource planning*) and the manufacturing industry since that is our primary focus at CIS.  I have a favorite customer, Jerry B. who was using a Big Chief Tablet and a Number Two Pencil before we sold and implemented ERP software.   Jerry’s term for systems control was not far off from how his company was processing years ago.  Was it 15 years ago?  Wow, time flies when you are having fun!

     I am always on the look-out for articles and whitepapers that include facts on the benefits of ERP since the expense and time it takes to implement is often a big turn off for manufacturing companies.  Many are also family owned therefore it sometimes takes a lot longer to get buy-in from the decision maker (s).   These folks typically don’t see the need since everyone seems to think everything is fine… no pain is communicated and the staff works extra hard to do their jobs with the little that they have and usually inventory is kept in several spreadsheets.   The reason I say several spreadsheets is because no one trusts the current system and so each department keeps up with inventory on their own - no integration.   These companies oftentimes have a decent package, but it was not set up right or it is a discrete manufacturing package rather than a process manufacturing package.  The inventory is not right since discrete manufacturers have eaches for raw materials and process manufactures have gallons, pounds, etc.  Inventory is not right since a discrete package does not convert the correct amount of material in the books for the bill of materials usage.   I have another article on this topic:  What Kind of Manufacturer Are You- Process or Discrete?  Link: http://www.customis.com/business-application/blog/what-kind-of-manufacturer.aspx

     The business owner sees no problem with the current system and is the type of individualwho has worked hard all his life to build the company and does not spend an extra dime without a good reason.  He want facts!  What will spending 50K on a software package do for me?  He knows when they add a new tank or mixer exactly how that will help them make more money.

     I can also relate the lack of a comprehensive ERP in manufacturing companies with a board of directors.   Again, it takes longer to get buy-in because the board is not doing the day-to-day work and are probably not monitoring the inventory or perhaps not even the financials that closely.  Of course, why spend money on ERP when everything seems to be working fine?   These types of companies and individuals want facts to substantiate an ERP investment.

     Today I saw an article about a whitepaper that helps me do my job and provides statistics on:  To ERP or Not to ERP In Manufacturing, It Isn’t Even a Question. This article is by Kevin Prouty and Nick Castellina of the Aberdeen Group that provides companies with fact based research and insight.  You can visit their site at www.aberdeen.com.

     Kevin and Nick based this paper on several key areas with key business statistics with companies that have made the move to ERP and companies that have not made the move to ERP.   According to this paper, 26% of manufacturers still have not implemented ERP.
    Facts Included:

    • Why haven’t companies implemented ERP (54% indicated that the internal effort was the top obstacle)
    • Company without ERP sizes (I was surprised to learn that 1/3 of the companies without ERP are between 25M to 100M and then another 1/3 were over 250M.)
    • What companies are using instead of ERP (Spreadsheets was number one – no surprise here!)
    • Performance of companies with ERP vs. without (can not measure inventory level improvement without implementing ERP BUT the paper does show a 22% improvement in inventory levels – not surprised)
    • Business benefits achieved from ERP  (I had to show this chart in case you don’t read the entire paper)

    ERP for Manufacturing Facts

    Selected capabilities compared for ERP vs. no ERP (details include internal collaboration and organization, standardized process capabilities, information and decision making capabilities, and managing the money!)

     I understand that researching, buying, and implementing ERP or even part of an ERP system is a big investment and culture change.  I have been working with manufacturing and distribution companies on this subject for 15 years.  Software and partners like us, make it easy to buy with great deals, financing, even software as a service.  I even spend a lot of time with my prospects understanding their business processes to make sure our solutions are a good fit.   The question you need to ask yourself as a business owner is how can you afford not to make this step?

     I have to add this too... Microsoft just announced yesterday that Dynamics GP is on sale for 20% off until November 30, 2012.

     *ERP as Defined by Wikipedia   "ERP or Enterprise Resource Planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders."

     Thanks to Kevin Prouty and Nick Castellina and the Aberdeen Group for continuing to provide these insightful papers.

     Nancy Phillippi is the sales consultant for manufacturing and distribution companies at Custom Information Services (CIS).   CIS is a Microsoft Dynamics GP Partner and a Managed IT Service Provider in North Texas.
    Visit the CIS website at www.customis.com.

     

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